Question 1

The country of Gerance produces two goods, cars and wine. Last year, it produced 1,000 cars and 15,000 cases of wine. This year, it produced 1,300 cars and 20,000 cases of wine. Given no other information, which of the following events could not explain this change?
A)Gerance experienced a reduction in unemployment.
B)Gerance experienced an improvement in car-making technology.
C)Gerance acquired more resources.
D)Any of these events could explain the change.

Accepted Answer

The answer of The country of Gerance produces two goods,...

Question 2

Economists believe that production possibilities frontiers
A)never have a bowed shape.
B)rarely have a bowed shape.
C)often have a bowed shape.
D)always have a bowed shape.

Accepted Answer

Production possibilities frontiers often have a bowed shape because not all resources are equally suitable for producing both goods. Therefore, as the economy moves from producing more of one good to producing more of another, it must give up increasing amounts of the first good to produce each additional unit of the second good. This results in a bowed shape of the production possibilities frontier.

Question 3

In a certain economy, jam and bread are produced, and the economy currently operates on its production possibilities frontier. Which of the following events would allow the economy to produce more jam and more bread, relative to the quantities of those goods that are being produced now?
A)Unemployed labor is put to work producing jam and bread.
B)The economy puts its idle capital to work producing jam and bread.
C)The economy experiences economic growth.
D)All of the above are correct.

Accepted Answer

Economic growth would increase the economy's overall production capacity, allowing for more jam and bread to be produced. Utilizing unemployed labor (A) and putting idle capital to work (B) may increase current production, but would not necessarily increase the economy's overall production capacity.

Question 4

A production possibilities frontier can shift outward if
A)government increases the amount of money in the economy.
B)there is a technological improvement.
C)resources are shifted from the production of one good to the production of the other good.
D)the economy abandons inefficient production methods in favor of efficient production methods.

Accepted Answer

A production possibilities frontier (PPF) represents the maximum combination of two goods that an economy can produce given its resources and technology. If there is a technological improvement, the economy can produce more of both goods, which shifts the PPF outward. Choices A, C, and D do not result in a shift of the PPF outward. Increasing the amount of money in the economy (Choice A) can lead to inflation but does not increase the economy's productive capacity. Shifting resources from the production of one good to another (Choice C) only results in a movement along the PPF. Abandoning inefficient production methods in favor of the efficient ones (Choice D) also provides for more efficient resource allocation, it only leads to a movement along the PPF limited by technology.

Question 5

Table 2-3
Production Possibilities for Footville 
-Refer to Table 2-3. What is the opportunity cost to Footville of increasing the production of shoes from 400 to 600?
A)400 socks
B)300 socks
C)200 socks
D)100 socks

Accepted Answer

To increase the production of shoes from 400 to 600, Footville must give up the production of 300 socks (from 800 to 500). Therefore, the opportunity cost of increasing shoe production by 200 is 300 socks. The best choice is to consider whether the benefits of producing an additional 200 shoes outweigh the opportunity cost of producing 300 fewer socks.

Question 6

Table 2-1
The following table contains some production possibilities for an economy for a given month. 
-Refer to Table 2-1. If the production possibilities frontier is bowed outward, then "?" could be
A)400.
B)450.
C)600.
D)750.

Accepted Answer

The answer of Table 2-1
The following table contains some production...

Question 7

Table 2-4
Production Possibilities for Picnicland 
-Refer to Table 2-4. What is the opportunity cost to Picnicland of increasing the production of burgers from 450 to 750?
A)150 hotdogs
B)225 hotdogs
C)300 hotdogs
D)450 hotdogs

Accepted Answer

The answer of Table 2-4
Production Possibilities for Picnicland 
-Refer to...

Question 8

A production possibilities frontier shifts outward when
A)the economy experiences economic growth.
B)the desires of the economy's citizens change.
C)at least one of the basic principles of economics is violated.
D)opportunity costs are lessened.

Accepted Answer

The production possibilities frontier (PPF) shows the maximum possible combinations of two goods that can be produced with given resources and technology. Economic growth means increased availability of resources, improved technology, or both, allowing for the production of more goods and services. This shifts the PPF outward, indicating that more goods and services can be produced with existing resources and technology.

Question 9

A certain production possibilities frontier shows production possibilities for two goods, jewelry and clothing. Which of the following concepts cannot be illustrated by this model?
A)the flow of dollars between sellers of jewelry and clothing and buyers of jewelry and clothing
B)the tradeoff between production of jewelry and production of clothing
C)the opportunity cost of clothing in terms of jewelry
D)the effect of economic growth on production possibilities involving jewelry and clothing

Accepted Answer

The production possibilities frontier model can only illustrate production possibilities and trade-offs between goods. It does not show the flow of dollars between sellers and buyers.

Question 10

When a production possibilities frontier is bowed outward, the opportunity cost of producing an additional unit of a good
A)increases as more of the good is produced.
B)decreases as more of the good is produced.
C)does not change as more of the good is produced.
D)may increase, decrease, or not change as more of the good is produced.

Accepted Answer

The answer of When a production possibilities frontier is bowed...

Question 11

Table 2-3
Production Possibilities for Footville 
-Refer to Table 2-3. Which of the following statements is correct?
A)The opportunity cost of an additional 200 shoes is constant at 200 socks.
B)The opportunity cost of an additional 200 shoes is constant at 300 socks.
C)Footville's production possibilities frontier is a straight, downward-sloping line.
D)The opportunity cost of an additional 200 shoes increases as more socks are produced.

Accepted Answer

According to the production possibilities table, as more shoes are produced, the opportunity cost in terms of socks increases. For example, to produce an additional 200 shoes, the opportunity cost goes from 200 socks to 300 socks. This means that producing more shoes comes at a higher cost of sacrificing the production of socks. Therefore, option D is correct. Option A is incorrect because the opportunity cost changes as more shoes are produced. Option B is also incorrect because the opportunity cost increases as more shoes are produced. Finally, option C is not necessarily true because the production possibilities frontier could have a bowed-out shape indicating that the opportunity cost is not constant.

Question 12

Production possibilities frontiers are usually bowed outward. This is because
A)the more resources a society uses to produce one good, the fewer resources it has available to produce another good.
B)the opportunity cost of producing a good decreases as more and more of that good is produced.
C)of the effects of technological change.
D)resources are specialized; that is, some are better at producing particular goods rather than other goods.

Accepted Answer

The answer of Production possibilities frontiers are usually bowed outward....

Question 13

Suppose an economy only produces two goods, robots and ice cream. Last month, the economy produced 10 robots and 200 gallons of ice cream. This month, the same economy produced 15 robots and 240 gallons of ice cream. Which of the following statements could explain this change?
A)This month, the economy reduced the unemployment of its resources.
B)This month, the economy experienced an improvement in technology.
C)This month, the economy experienced an increase in resources
D)All of the above are correct.

Accepted Answer

The answer of Suppose an economy only produces two goods,...

Question 14

In a certain economy, toys and greeting cards are produced, and the economy currently operates on its production possibilities frontier. Which of the following events would allow the economy to produce more toys and more greeting cards, relative to the quantities of those goods that are being produced now?
A)The economy experiences economic growth.
B)There is a technological advance in the toy industry, but the greeting card industry experiences no such advance.
C)There is a technological advance in the greeting card industry, but the toy industry experiences no such advance.
D)All of the above are correct.

Accepted Answer

The answer of In a certain economy, toys and greeting...

Question 15

Suppose an economy produces two goods, food and machines. This economy always operates on its production possibilities frontier. Last year, it produced 1000 units of food and 47 machines. This year it experienced a technological advance in its machine-making industry. As a result, this year the society wants to produce 1050 units of food and 47 machines. Which of the following statements is correct?
A)Because the technological advance occurred in the machine-making industry, it will not be possible to increase food production without reducing machine production below 47.
B)Because the technological advance occurred in the machine-making industry, increases in output can only occur in the machine industry.
C)In order to increase food production in these circumstances without reducing machine production, the economy must reduce inefficiencies.
D)The technological advance reduced the amount of resources needed to produce 47 machines, so these resources could be used to produce more food.

Accepted Answer

The technological advance in the machine-making industry will lead to a decrease in resources needed to produce machines. This means that the same amount of resources can now be used to produce more food without sacrificing machine production. Therefore, it is possible to increase food production to 1050 units while still producing 47 machines.

Question 16

The production possibilities frontier is used to illustrate some basic economic ideas, including
A)scarcity.
B)opportunity cost.
C)economic growth.
D)All of the above are correct.

Accepted Answer

The production possibilities frontier demonstrates scarcity by showing that resources are limited and choices have to be made about how to allocate them. It also displays opportunity cost by illustrating that producing more of one good requires sacrificing the production of another good. Additionally, shifts in the production possibilities frontier over time can demonstrate economic growth as a result of factors such as technological advancements and increased resources.

Question 17

Table 2-4
Production Possibilities for Picnicland 
-Refer to Table 2-4. What is the opportunity cost to Picnicland of increasing the production of hotdogs from 450 to 900?
A)150 burgers
B)225 burgers
C)300 burgers
D)450 burgers

Accepted Answer

To produce an additional 450 hotdogs, Picnicland would have to give up producing 225 burgers (opportunity cost). Therefore, the opportunity cost of increasing the production of hotdogs from 450 to 900 is 225 burgers. The best choice would be to consider the benefits and costs of producing the additional 450 hotdogs and decide if the opportunity cost of 225 burgers is worth it.

Question 18

Table 2-2
The following table contains some production possibilities for an economy for a given year: 
-Refer to Table 2-2. If the production possibilities frontier is bowed outward, then "?" could be
A)6000.
B)5500.
C)5000.
D)4500.

Accepted Answer

The answer of Table 2-2
The following table contains some production...

Question 19

Suppose an economy produces two goods, food and machines. This economy always operates on its production possibilities frontier. Last year, it produced 1000 units of food and 47 machines. This year, it is producing 1050 units of food and 52 machines. Which of the following events could not explain the increase in output?
A)a reduction in unemployment
B)an increase in available labor
C)an improvement in technology
D)Any of these events could explain the increase in output.

Accepted Answer

A reduction in unemployment, while it may lead to a more efficient use of labor, cannot directly lead to an increase in output on its own. The increase in available labor in choice B and the improvement in technology in choice C can both lead to an increase in output.

Question 20

Figure 2-4 
-Refer to Figure 2-4. At which point is this economy producing its maximum possible quantity of doors?
A)R
B)S
C)T
D)U

Accepted Answer

The answer of Figure 2-4 
-Refer to Figure 2-4. At...

Quiz 2: Thinking Like an Economist

The country of Gerance produces two goods, cars and wine. Last year, it produced 1,000 cars and 15,000 cases of wine. This year, it produced 1,300 cars and 20,000 cases of wine. Given no other information, which of the following events could not explain this change?

Economists believe that production possibilities frontiers

In a certain economy, jam and bread are produced, and the economy currently operates on its production possibilities frontier. Which of the following events would allow the economy to produce more jam and more bread, relative to the quantities of those goods that are being produced now?

A production possibilities frontier can shift outward if

Table 2-3 Production Possibilities for Footville -Refer to Table 2-3. What is the opportunity cost to Footville of increasing the production of shoes from 400 to 600?

Table 2-1 The following table contains some production possibilities for an economy for a given month. -Refer to Table 2-1. If the production possibilities frontier is bowed outward, then "?" could be

Table 2-4 Production Possibilities for Picnicland -Refer to Table 2-4. What is the opportunity cost to Picnicland of increasing the production of burgers from 450 to 750?

A production possibilities frontier shifts outward when

A certain production possibilities frontier shows production possibilities for two goods, jewelry and clothing. Which of the following concepts cannot be illustrated by this model?

When a production possibilities frontier is bowed outward, the opportunity cost of producing an additional unit of a good

Table 2-3 Production Possibilities for Footville -Refer to Table 2-3. Which of the following statements is correct?

Production possibilities frontiers are usually bowed outward. This is because

Suppose an economy only produces two goods, robots and ice cream. Last month, the economy produced 10 robots and 200 gallons of ice cream. This month, the same economy produced 15 robots and 240 gallons of ice cream. Which of the following statements could explain this change?

The production possibilities frontier is used to illustrate some basic economic ideas, including

Table 2-4 Production Possibilities for Picnicland -Refer to Table 2-4. What is the opportunity cost to Picnicland of increasing the production of hotdogs from 450 to 900?

Table 2-2 The following table contains some production possibilities for an economy for a given year: -Refer to Table 2-2. If the production possibilities frontier is bowed outward, then "?" could be

Figure 2-4 -Refer to Figure 2-4. At which point is this economy producing its maximum possible quantity of doors?